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3.1.11.30 Working credit depletion

Summary

This topic covers:

  • circumstances for depletion
  • how a partner's income can deplete the recipient's working credit
  • how to calculate the depletion amount, and
  • changes to ordinary income.

Circumstances for depletion

For depletion to occur a person must:

  • be eligible for working credit
  • have total ordinary income that is more than their personal income free area
  • be paid employment income (1.1.E.102) in the instalment period, and
  • have a working credit balance greater than zero.

If the employment would cause the person to lose qualification for payment of JSP, YA (other), DSP or CP for the following reasons, they will still be regarded as qualified while they deplete their working credit balance:

  • a JSP or YA (other) recipient is no longer unemployed
  • a DSP recipient now has a continuing ability to work for 30 hours or more, or
  • a CP recipient no longer meets the constant care requirement.

This ensures an incentive is available to those who can get full-time work.

A person can only be treated as being qualified for their payment under this provision if they:

  • have employment income on that day
  • are depleting their working credits on that day
  • are qualified (except employment related qualification) on that day, AND
  • are payable (except for the effect of the employment income) on that day.

Example 1: Person regarded as qualified for the purposes of depleting their working credit balance.

Janine has been receiving JSP for over 8 months without any income and has built up 800 working credits. She takes up a full-time permanent job and is paid $1,000 (gross) in employment income per fortnight. Because she has working credits to use, she receives JSP until she runs down her working credits to nil. In the first fortnight she is paid $1,000, and receives a part payment of JSP, after the 800 working credits have reduced her assessable income to $200.

Example 2: Person loses YA for other than employment purposes and cannot use working credits.

Joshua has been receiving YA and has built up 3,100 working credits. He receives a large amount of assets from his grandfather's estate, which takes him over the allowable assets limit. His YA is no longer payable and it is cancelled. Joshua is not allowed to use his working credits because his reason for going off payment was not employment related.

Act reference: SSAct section 1073J Working credit balance prevents loss of qualification in certain cases

How a partner's income can deplete the recipient's working credit balance

The impact that a partner's income has on a recipient's working credit depletion depends on whether the couple is an allowance couple or a pensioner couple.

Type of couple Recipient Partner

Both are receiving an allowance.

 Own employment income affects their working credit depletion. Employment income of their partner does not affect their depletion. However, if there is a partner income excess amount, it affects that person's allowance immediately under the 60% partner income test taper. Own employment income affects their working credit depletion. Employment income of their partner does not affect their depletion. However, if there is a partner income excess amount, it affects that person's allowance immediately under the 60% partner income test taper.

Explanation: This ensures that each individual has their own financial incentives to undertake paid work, consistent with the income test design for such couples.
Person is receiving an allowance and their partner is not receiving a social security pension or benefit. Own employment income affects their working credit depletion. Employment income of their partner does not affect their depletion. Not eligible to deplete. Own employment income does not affect the working credit depletion of their partner.
Both recipient and partner are below age pension age, and are in receipt of a pension. Half the combined employment income will count in the depletion calculation. Half the combined employment income will count in the depletion calculation.
Person is in receipt of an allowance and partner is over age pension age and in receipt of a pension. Half the combined employment income will count in the depletion calculation. Not eligible to deplete.
Both are in receipt of a pension with the partner over age pension age. Half the combined employment income will count in the depletion calculation. Not eligible to deplete.
Both are below age pension age, and 1 member receives a pension and the other receives an allowance. Half the combined employment income will count in the depletion calculation. Half the combined employment income will count in the depletion calculation.
1 member is below age pension age and receives a pension, and the other does not receive a social security pension or benefit. Half the combined employment income will count in the depletion calculation. Not eligible to deplete.

Example 1: Allowance couples (figures current at 1 April 2021)

Joe and Vicki receive JSP and PPP (respectively). Joe has regular part-time wages so has a nil working credit balance. One fortnight he does some extra shifts and is paid $1,175. As this is over the partner income free area of $1,124, the amount of $51.00 (i.e. $1,175 − $1,124) is the 'partner income excess' that affects Vicki's rate under the partner income test. Vicki occasionally does small amounts of casual work and currently has 500 working credits. However, Joe's 'partner income excess' will not be offset against Vicki's working credit balance, so Vicki's PP will reduce by $30.60 that fortnight (i.e. 60c for every dollar over $1,124).

Example 2: Pension couples (figures current as at 1 April 2021)

Fred and his partner Jenny both receive DSP and are under age pension age. As they have no other income other than their pensions, they have accrued 500 working credits each. Jenny commences part-time work and is paid $800.00 for the fortnight. Under the combined income test the income is split in half and $400.00 employment income is assessed to work out each person's pension payment. The combined income free area for the couple is $316.00 or $158.00 each. The assessable income before working credit depletion is $400.00 − $158.00 = $242.00 each. As this amount is offset against their working credits both Fred and Jenny will receive the maximum rate of pension for the fortnight and retain 258 working credits each (500 − 242).

Note: Pensioners over age pension age (apart from PPS) may be eligible for the work bonus. Employment income, and self employment income from gainful work, is eligible for the work bonus from 1 July 2019. Prior to 1 July 2019, only employment income was eligible for the work bonus. See 3.1.15 for more information, and 3.1.15.40 for examples.

How to calculate the depletion amount

Working credit depletes on a daily basis just as rates of income support are calculated daily. However, for recipients who do not have a rate change or whose working credits do not reduce to nil during their instalment period working credit calculations can be done as FORTNIGHTLY CALCULATIONS, in the same way as rates are calculated.

The depletion amount is the least of the recipient's:

  • employment income
  • the amount by which the total ordinary income exceeds the income free area, or
  • the working credit balance.

The purpose of finding the least of the 3 amounts is:

  • firstly, working credits can be used only if the person has employment income (i.e. from a job) because the scheme is designed explicitly to give a work incentive, rather than a general relaxation of the income test
  • secondly, the person takes advantage of the income free area before any depletion occurs, and
  • thirdly, the person cannot deplete more than their available working credit balance.

Example: John is a single person receiving JSP. He has commenced casual employment as a sales assistant and is paid $300.00 this instalment period, and has no income from other sources. He has accrued 500 working credits in the time he has been receiving JSP.

Step Calculation method Answer
Calculate depletion amount

Depletion amount is the lesser of:

  • income from employment = $300.00
  • total ordinary income minus income free area $300.00 − $150.00 = $150.00
  • working credits = 500
 = $150.00
Calculate effect on working credit balance NEW working credit balance = old balance (500) − depletion amount (150) = 350

Exception: The person may have a different rate of income part way through the instalment period or may deplete their working credit balance to nil. In this case a DAILY calculation of the working credit depletion needs to be done, as well as a daily rate calculation of the person's entitlement to payment. For a comprehensive daily calculation example see 3.1.11.40.

Act reference: SSAct section 1073F Working out accruals and depletions of working credit for social security beneficiaries, section 1073H Working out accruals and depletions of working credit for social security pensioners

Changes to ordinary income

The total ordinary income that would have been applied to the income test is reduced in fortnights in which working credit depletion occurs. The amount by which total ordinary income is reduced is the working credit depletion amount, converted to a yearly or fortnightly basis as applicable to the recipient's payment for each day.

It could be that all of the recipient's ordinary income above the free area is offset in this way so that there is no reduction to payment rate under the income test. However, when the working credits are eventually exhausted, any remaining ordinary income above the free area will reduce the payment using normal income test rules for each day. For a comprehensive daily calculation example see 3.1.11.40.

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